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Powell v HMRC

This is an interesting case about the rules relating to loans to participators. Where a close company makes a loan to a participator the company is required to account for tax under s 455. If the loan is released the company is refunded the tax but the amount written off is treated as income of the participator. Here a loan made to the taxpayer made by company A was novated and replaced by an indebtedness to company B, the holding company of company A. The question was whether the taxpayer had been released from his obligations to repay company A. The tribunal found that the point was significantly more complex than it had first thought but after a careful examination of the terms of the novation agreement and an analysis of the relevant case law it concluded that the taxpayer had indeed been released from the obligation to repay company A and hence that the amount released was treated as his income.

The situation here is unusual and appears to